A threat no more: PwC study finds insurers embracing insurtechs
Once viewed as disruptive competitors and threats to established insurance companies, insurtech startups are increasingly seen as supporting players that can help incumbent insurers enter new markets and offer new services.
That is one of two major conclusions drawn from the 2018 Insurtech Trends Report by Startupbootcamp a global startup incubator based in Copenhagen, and PwC, the London-based international professional services network.
The other, closely related finding is that 80% of insurtechs now operate beyond the insurance sector itself and are concentrating their efforts on industries such as agriculture, aircraft manufacturing and healthcare, to name a few.
“Insurers are now focused on the promise of innovation from beyond the confines
of their own sector,” the report states. “In other words, the term insurtech itself now increasingly falls short of describing what these startups offer. Rather, the emerging picture is now of an ecosystem that brings together adjacent industries to provide an improved service of greater value to insurers and their customers.”
By collaborating with these startups, the report maintains, traditional insurers gain access to new revenue streams, especially through offering new prophylactic services aimed at preventing covered damages from occurring in the first place. Of the 226 Startupbootcamp participants that took part in the research, 80% characterized prevention and related services as the most important future direction for the insurance industry as a whole.
Benefiting from AI
Another benefit for the incumbents is that insurtechs offer them new data sources and new ways to derive value from their data with the use of artificial intelligence. AI is the primary technology for 41% of the Startupbootcamp participants, the report notes, and has the potential to give traditional insurers significant insights from the vast amounts of data that they collect.
The biggest challenge, the study adds, is to find ways to integrate the insurtechs’ AI systems with the incumbents existing technology. Rather than build cumbersome links to older systems, the report describes how some insurers are opting to invest in completely new technology infrastructure, which allows for easy integration with third party plug ins.
The study also finds that both established insurance companies and startups are increasingly looking at new products, with 80% reporting that they are interested in business models based on the new sharing economy.
Among the startups, gender diversity is improving, the report found, and 23% of the survey participants had female founders and co-founders. Despite the progress, men are still five times more likely to hold a Chief Technology Officer position, while women are twice as likely to be Chief Marketing Officers.
Commenting on the changing nature of the insurance industry’s ecosystem, Jim Bichard, PwC’s insurance leader for the UK, observes that “Three years ago the hype was about startups disrupting traditional insurers. Now the talk—and increasingly the reality--is about startups and insurers working together to create meaningful partnerships.”